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| ONGC again asserts pre-emptive rights on Cairn deal |
| BS Reporter / New Delhi Oct 22, 2010, 00:09 IST |
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The war of words between Cairn India and Oil and Natural Gas Corporation (ONGC) today saw the latter shooting another letter to Cairn.
It the letter, the state-run company has sought details of Vedanta’s financial strength, technical capability and past experience in the field of oil and gas. Vedanta has signed a deal to buy a majority stake in Cairn India. ONGC is Cairn’s partner in eight blocks, including three producing ones in Barmer in Rajasthan, Cambay in Gujarat and Ravva in Andhra Pradesh.
This is the third time that ONGC asserted its pre-emptive rights in the blocks after the Vedanta deal was announced on August 16. Cairn had earlier dismissed ONGC's claims, stating that “the transaction (Cairn Plc’s sale of up to 50 per cent stake in Cairn India to Vedanta) is a sale of shares in Cairn India, rather than an assignment of any participating interest under the various production sharing contracts and joint operating agreements”.
In the letter to Edinburgh-based Cairn Energy today, ONGC said it had pre-emptive rights in relation to the participating interests held by Cairn India or its subsidiaries in the eight blocks where the two companies were partners.
ONGC examined the relevant agreements signed by Cairn India and its affiliates with the Indian government and ONGC as a participating company.
“In accordance with the terms of the relevant agreements, the consent of ONGC would need to be sought for the proposed transaction,” ONGC Company Secretary N K Sinha said in the letter.
Cairn is selling between 40 per cent and 51 per cent stake in Cairn India to London-listed Vedanta for $6.65 billion to $8.48 billion.
ONGC asked Cairn Energy to provide full details, along with copies of the agreements and other arrangements entered into with Vedanta.
Cairn India is the operator in the Barmer oil block in Rajasthan, the country's largest inland oilfield, with a 70 per cent participating interest. ONGC holds the rest. Average crude oil production from the block is 125,000 barrels per day.
ONGC pays the entire royalty on the block and has been petitioning the government to reimburse 70 per cent of the royalty that it should not be paying. Though ONGC has paid Rs 302 crore till June 2010, the amount is expected to rise significantly over the production life of the block.
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